The Effect of Land policy on Foreign Direct Investments in
the Solomon Islands

by Phillip Tagini, LLM Candidate, USP Law School

1. Introduction

Land policy is a factor, which greatly affects the flow of foreign direct
investment (FDI) in the South Pacific. Foreign direct investment occurs where an
enterprise from one country (home) engages in economic activities in the economy
of another country (host).[1] Where land policy is transparent and security of
tenure is guaranteed, FDI flows in at a higher rate. The opposite seems to hold
true for countries where land policy is clouded and where there is uncertainty
about the security of tenure.[2] This general rule applies to the Solomon
Islands just as it does to any other South Pacific Island country. The land
tenure and policy in the Solomon Islands has hindered the flow of FDI to a great
extent. This paper attempts to highlight some of the ways land tenure and policy
are working against FDI. It then proceeds to briefly describe the land policy
implemented in the Solomon Islands since the Protectorate was established in
1893 and highlight the obstacles these policies created to FDI and other
economic developments. In the end, some reform suggestions are supplied with the
aim of enhancing land policy and hence improving the climate for FDI.

2. Two major obstacles to FDI establishment

As regards land tenure and policy in the Solomon Islands, the foreign
investor faces two major obstacles when attempting to establish an
enterprise.[3] These are (i) identifying the rightful people to deal with
concerning land and (ii) security of title to land. These two problems are
particularly true for customary land. Where the landowner is the Crown, the
first problem of ascertaining the land owner may be eliminated, but the second
problem still bedevils foreign investors with the same force.

(i) Difficulty of ascertaining land holding entity

To the foreign investor, the process of identifying landowners is fraught
with difficulties. Even where landowners are identified, the task of finding the
right person to deal with is still an onerous one. Most foreign investors are
used to dealing with individuals as land holding entities and a central land
department where most records are kept. When such foreign investors arrive in
the Pacific, they discover (often to their detriment) first that the lands
department has scant information about the land holding groups in the country.
Second, they also find out that they have to take upon themselves the task of
identifying the appropriate landowners and negotiate a commercial agreement.
[4]

Most often, the foreign investor is told that land in communally owned. In
Fiji for instance, land is held by the ‘mataqali’ or in the Solomon
Islands by the ‘tribe.’ However, this is not simple, as it might
seem. In the Solomon Islands, while land might be owned by tribes, it is also
well known that families as well as individuals hold parcels of land. The Allan
Commission established to record customary land during the 1960s testified to
this fact. In particular they found the "line (descent group) as the primary
unit of landholding in most parts of Solomon Islands, but found a progressive
breakdown to individual tenure in almost all coastal areas." [5] This fact only
adds another level of difficulty of identifying land-holding groups. [6] In the
process of identifying the landowners, the foreign investor might need to travel
to the island where they intend to establish operation. [7] In a country like
the Solomon Islands, where most of the natural resources is located on customary
land, [8] trips to outer islands is not out of the ordinary. This further adds
to difficulty and cost of establishment. A classical example of the difficulty
in identifying landowners or the right landowners to deal with land is the case
of the North New Georgia Timber Corporation (Western Province). The aim of
setting up the corporation was "to promote the utilisation of the timber
resources of North New Georgia for the public benefit." [9] Proposals for
setting up the corporation was first launched in 1972, but for six years legal
proceedings failed to establish the customary land owners and those who would be
entitled to speak on behalf of the corporation. The corporation was finally set
up in 1979. This delay meant operations of Levers Pacific Timber on New Georgia
[10] had to be put off. [11]

(ii) Security of land title

The second problem has to do with the security of land title. Even where a
representative is identified and a land transaction sealed, and title
transferred, security of that land title cannot be guaranteed. First of all,
since it was a customary transfer, secondary rights [12] and usufructory rights
[13] would normally still apply. If the land was conveyed by the male line
representative, the members from the female lineage would still claim secondary
rights over the land notwithstanding the complete sale made by the
representative from the male lineage. Additionally, members might still claim
usufructory rights such as right to fetch water or fruits. This creates a
fertile environment for disputes to grow.

Another issue that undermines the security of title is the possibility of
disputes. There are usually two types of disputes. Boundary disputes and
disputes regarding the locus standi [14] of land representatives. There are
other kinds of disputes involving substantive rights. [15]

In the Solomon Islands, as far as boundaries are concerned, only 13% of land
is registered, the rest is regulated by custom.[16] The remaining 87% held under
customary law is not surveyed, recorded or registered. The boundaries of those
lands are only recorded by oral tradition and marked by natural features such as
rivers, mountains, rocks, trees or shrines. Though customary owners may claim to
know their boundaries well, in practice it is difficult to be certain about the
boundaries because these landmarks often change as a result of natural elements.
Examples of boundary disputes abound in the Solomon Islands – in and out
of court. Brown interestingly notes that "a browse through both the Solomon
Islands Law Reports and judgements available on USP’s Web Site drives home
the dominance of land as a central motif of litigation." [17] Perhaps it might
be added that the majority of the land cases found on the USP Web Site concern
boundaries.

For the sake of illustration, a few examples will be highlighted. In 1981,
Levers Pacific Timber (a subsidiary of Levers Brothers UK) suffered huge losses
when it had a violent confrontation with landowners at Enoghae in North New
Georgia. A similar incident occurred in 1995 when the massive government-logging
project on Pavuvu (Central Province) was brought to a standstill in 1996. [18]
Similar disputes were tried in court. The case Anjo v Allardyce Timber Company
and Attorney General [19] is a classic example of the complications that may
arise in customary land transactions. In this case the Defendant Company
(Allardyce Timber Company) was operating under a timber rights license granted
by the Commissioner of Forests. Due to an inconsistency in the actual boundaries
and those that appear in the license, the Defendant Company entered the
plaintiff’s (Anjo) land. The plaintiff successfully brought proceedings to
stop the Defendant Company from further trespassing into the plaintiff’s
land. [20] This resulted in an injunction by the court, which interrupted the
operation of the bona fide foreign developer. The examples highlighted above are
few examples of how land tenure and disputes can be a stumbling block for
establishing and operating foreign enterprises in the Solomon Islands. The net
effect of this whole land game is a reduction in the flow of FDI into the
Solomon Islands.

3. Land policy and reform

Prior to colonisation, customary law regulated land tenure. In 1893 the
Solomon Islands was declared a protectorate of the British. Since then, land
policy was a blend of foreign concepts as well as local principles. The land
policy since the protectorate is complex but can be categorised in four [21]
phases. These are categorised as such depending on the dominant government
ideology. The four phases will be outlined below and the reforms that have been
attempted during these phases will also be highlighted. At the end, some
suggestions for further reform will be made.

Phase one – Waste Land period (1893 – 1920s)

During this period, the dominant theme of land policy was alienation of
native lands to establish foreign companies. This was necessary to finance the
new protectorate. In addition to acquiring land for foreign companies, the
colonial government was also converting land to its use. Such alienation was
done by means of Kings’ (or Queens’) regulations. [22] The first
land transaction was done pursuant to Kings Regulation No. 4. This transaction
alienated large tracts of land to Pacific Islands Company Ltd for the
development of coconut plantations. This parcel of land was later sold to Levers
Solomons in 1908 when the Pacific Islands Company closed down and left the
Solomons. [23] Similar Regulations now commonly known as ‘waste land
regulations were enacted in 1900, 1901 and 1904. [24] These regulations further
alienated land from the natives to the foreigners. In 1914, the Land Regulation
stopped further purchase of native land by foreigners. In the same year the
Phillips Commission was tasked to hear land claims which were alienated under
the waste land regulations or transferred under the leases made under the
various other regulations. [25] The first phase was characterised by
dissatisfaction from customary land owners. This was because they either
received little or no payment for their lands that were alienated. Land policy
then was imposed by the colonial power in the pursuit of achieving economic
reliance, which was pressed on to the economy by the British government.

Phase two – Redistribution period (1920s – 1940s)

During this period, land that was wrongfully acquired during the waste land
period was returned to native owners after adjudicating. The adjudicating body
was the Phillips Commission. [26] This Commission was set up in 1914 but started
its work in 1919 due to the First World War. [27] Judge Phillips heard 55 claims
against land alienation and returned large tracts of land either because there
were defects in the original conveyances, wrong definition of boundaries or
because the waste lands were found not vacant. [28] During this period, the
colonial administration was sympathetic towards local sentiments because it was
realising such dissatisfaction must be quelled if economic development was to
proceed.

Phase three – Land registration period (1940s – 1970s)

During this period, the catch words for land policy was land registration.
The recommendations for land registration was made by the Allan’s
Commission which was set up in the late 1940s but did not report until 1957 due
to the Second World War. Land registration was undertaken pursuant to the Land
and Titles Ordinance (1959). In this period, land registration was sporadic
covering scattered parcels of land over an indefinite time and unpredictable
period. [29] Nine years later, in 1968, the Lands and Titles Ordinance was
amended to provide for a systematic settlement (registration). Systematic
registration occurs in a "methodical manner and in an orderly sequence, district
by district, village by village, block by block, parcel by parcel, throughout
the territory concerned." [30] This system of land registration can be
contrasted with the sporadic system where registration was done on scattered
parcels over an unpredictable time span. Between 1965 and 1978, thirteen schemes
were implemented.[31] The total area registered under the land settlement was
6,990 hectares or 0.25% of the total land area of Solomon Islands. Thirty two
percent of the titles were held in joint ownership, 17% ownership in common and
individuals held the remaining 50%. The systematic settlement scheme was
dissatisfactory to the customary landowners and only helped to raise suspicion
about the intention of the government for undertaking such a massive task.

A third major development regarding land policy occurred during this period.
This involved the establishment of the Local Court and the Customary Land Appeal
Court (CLAC). The Local Court was established under the Local Courts Act (1942),
while the CLAC was established under the Land and Titles (Amendment) Act (1972).
The establishment of these courts was important as they assume the role of
adjudicating. This was formerly done by the Land Commissioner. [32] The
Courts’ role in keeping land records was important in land administration.
During this period also, freehold titles to land held by non-Solomon Islanders
were automatically converted into 75 years leases from the government, subject
to the foreigner developing the land. [33] Land on the Guadalcanal plains where
Solomon Islands Plantations Limited is situated is the result of such an
arrangement. [34]

Phase four – land recording period (1980s – present)

During this period, the government has not actively pursued any land policy.
The situations in the previous period are basically carried forward. It has
caused some difficult experiences for both native landowners and foreigners but
the government has not prioritised these issues. History has shown that such
issues are very complex and difficult to tackle thus the government has adopted
a ‘hands off’ policy. The only conspicuous move came about in 1994
with the enactment of the Custom Land Records Act (Cap 132). This legislation
merely requires Landholding groups to voluntarily record their land boundaries.
It has however failed to achieve what it aimed to achieve because the massive
financial input it demands from landowners is a disincentive. The lack of
manpower to operate the recording machinery is also another drawback.

4. Addressing land reform today

Since the protectorate, land policies had hindered major economic
developments. Many potential foreign investment projects never got off the
ground because the cost of acquiring land and establishing the investment has
been too high (financially or otherwise). One observation that can be made from
the policies implemented to date is the requirement by native people that
certain valuable attributes of the customary land tenure be preserved. In
today’s world, economic development is an equally important aim to pursue.
It is impossible to discard either goal. A compromise must therefore be devised.
The following are some suggestions made in light of the history of
dissatisfaction over land policy as well as the need to bring in FDI.

(i) Customary land must be returned to customary owners

Today, the government holds some customary land but still hasn’t paid
for them. It also holds land for which rent has not been paid. These were land
that were converted into crown land from foreign investors in the 1970s. These
lands must be purchased or alternatively, they must be returned to the customary
owners. This includes all the freehold estates converted to perpetual estates
and rented out by the government during the 1970s. [35] Where these lands had
been leased to foreign companies, the government must first properly acquire the
land and then lease it to foreign enterprises. Where the government is unable to
do this, then the company must enter into arrangements with the local landowners
about the proper acquisition of the land. This situation has caused tremendous
dissatisfaction to the local landowners since the days of the colonial
administration and also caused insecurity for foreign developers. It is
suggested these outstanding land issues must be settled in order to create a
conducive environment for FDI or any development for that matter.

(ii) Establishment of land trusts or agents

This is necessary because in the Solomon Islands land 80% of the land is
still communally owned. Establishment of land trustees or agents might go some
way towards alleviating the problem of identifying people to deal with land. The
Native Land Trust Board in Fiji, established by the Native Land Trust Act, [36]
performs this function on behalf of the native land holding tribes. Similar
bodies were also set up in the New Hebrides. [37] There are a number of methods
of doing this but the fundamental requirement is that the land representative
must be clearly identified with a clear jurisdiction. In the Solomon Islands, a
similar trust board was established in 1959 by section 9 of the Land and Titles
Ordinance. This trust board was unsuccessful because its main purpose was to
manage vacant land which according to customary law is non existent. The Board
soon disappeared into oblivion. Today however, the role of such trustees or
agents must clearly be for the purpose of managing customary lands for the
benefit of custom owners. Legislation must spell out how the benefits are to be
distributed to benefit the landowners. This will avoid the problem faced in Fiji
where landowners only receive a small percentage after administrative costs are
deducted. Legislation must also clearly spell out the procedure for obtaining
decisions. It is suggested that such decisions must only be reached through
consensus. [39] Similar provisions which appear in the Forests Act (1998) or the
Land and Titles Act could be modified to fit that purpose.

(iii) Voluntary registration

Land holding groups must be encouraged to take an active role in the
registration of their customary land. It could also be made a condition of any
foreign investment that land must be registered. This has already been provided
for under the Customary Land Records Act (1994). The low success rate of the
land recording program is because of the lack of incentive by both customary
owners and administrators. The government can subsidise such registration to
ensure that interested parties can register their land.

(iv) Establishment of a Lands Tribunal

This land tribunal will merge the land jurisdiction of the existing local
court and the entire jurisdiction of the Customary Land Appeal Court (CLAC). It
will be able to hear matters relating to customary law at first instance and
also on appeal. However, like the Lands Tribunal set up for Vanuatu in 2000,
custom areas which have similar customary law must be established. Knowledgeable
people from these custom areas will sit to hear land cases relating to their
custom areas. Such tribunal must be independent and impartial to gain the
confidence of local landowners. It is hoped that such a land tribunal will take
over the role of the highly ineffective Local Court and Customary Land Appeal
Court. [39]

5. Conclusion

In the Pacific, land is one of the major resources. The land tenures are very
complex and the policies implemented by governments often do not help reduce
such complexities. This poses a great difficulty for FDI to flow into the
country. In this modern era, there is no doubt, that economic development is an
important pursuit of Pacific Island governments. In the Solomon Islands, the
land tenure and policies enforced since the Protectorate period are
unsatisfactory and hinder the flow of FDI. It is suggested that land reform in
order to identify landowners, register land and create an efficient land
adjudicating tribunal is necessary for creating a conducive environment for
FDI.

ENDNOTES

[1] Kenwood A and Lougheed A (1990) The Growth of the International Economy
1820 – 2000. Rougledge, London p 253

[2] See the following, though this list does not purport to be exhaustive.
Report of the Workshop on Land Tenure and Rural Development for the Countries of
the South Pacific (Tonga 1984), USP (1994), Crocombe R . Customary Land Tenure
and Sustainable Development: Complementarity or Conflict, SPC and USP (1995),
Lakau A, Customary Land Tenure and Economic Development in Papua New Guinea in
Land Issues in Crocombe and Meleisea, Land Issues in the Pacific (1994) pp 79 -
84, Overton J, Land Tenure and Cash Cropping in Fiji in Crocombe and Meleisea,
Land Issues in the Pacific (1994) pp 117 – 132, Hooper W, Development
Issues and Traditional Tenure in Tokelau in Crocombe and Meleisea, Land Issues
in the Pacific (1994) 191 - 204, Isala T, Land Tenure and Development Dollars in
Tuvalu in Crocombe and Meleisea, Land Issues in the Pacific (1994) 157 –
169, Pierre J Vanuatu: New Directions in Land Development Policies in Crocombe
and Meleisea, Land Issues in the Pacific (1994) 89 - 94, see also various
articles in Acquaye, B and Crcocombe, R. (eds) Land Tenure and Rural
Productivity in the Pacific Islands, FAO, SPREP, IPS (1984), See also generally
the following: Crocombe R, Land Tenure in the Pacific, USP, (1987) and Crocombe
R, Land Tenure in the Atolls, IPS (1987).

[3] Not all the FDI that entered the Solomon Islands are land based but a
very high percentage involve some land transactions. Where there is a joint
venture with a local partner who already has title to land, this problem might
be reduced. However, this does not mean that the enterprise is now land-problem
free. Issues concerning land might still be encountered when the business wants
to expand or where the business of the joint venture involves extraction of raw
material from land.

[4] An example of this occurred in 1999. At the beginning of 1999, a Malaitan
Company, Lagwaeano Logging and Sawmilling Company entered into an agreement with
an Asian Log Buying Company – Herea Dae Company to fell and purchase round
logs. Although the timber rights gave the Lagwaeano Company rights gave the
Lagwaeano Company the right to sell logs, there was still grave dispute over the
ownership of the land. Mr. Tadjodine, Herea Dae’s representative in
Honiara had to spend a lot of time and money to fly between Auki and Honiara to
try and settle the internal land disputes. This is just another example of the
difficulty foreign investors face when trying to identify owners and then
entering into a commercial agreement. The operation was called to a halt by the
end of 1999.

[5] See Lamour P, Solomon Islands: Customary Land Registration Policy in
Acquaye and Crocombe (1984) Land Tenure and Rural Productivity in the Pacific
Islands, USP at 71. Allan was of the opinion that these breakdown into
individual tenure should be encouraged because it allows for the introduction of
cash cropping especially permanent tree crops.

[6] This was the case even for Solomon Islanders who were involved in the
Land Settlement Scheme in the 1970s. Sometimes where the legitimate person is
identified, his involvement might be restricted because of language barriers or
the lack of understanding the government policies.

[7] In the Solomon Islands this is almost always the case. Logging companies
for instance must travel to the forest rich parts of the Solomon Islands. Often
the headquarters are located in Honiara, Auki or one of the Provincial capitals
but the operations normally take place outside the urban areas. Up till now,
such operations have taken place on the Island of New Georgia (Western),
Malaita, Guadalcanal, Kolobangarra, and Choiseul.

[8] In the Solomon Islands, customary land comprises 83% of the total land
area. See Ben W (ed) (1979) Land in Solomon Islands, USP, Suva, see table on p
249

[9] See Lamour P, The North New Georgia Timber Corporation in Lamour,
Crocombe and Taungenga (eds) (1981) Land, People and Government: Public Lands
Policy in the South Pacific, USP, p 136

[10] This is a subsidiary of Unilevers, a British multinational corporation
heavily involved in the Solomon Islands colonial economy.

[11] See Lamour P, The North New Georgia Timber Corporation in Lamour,
Crocombe and Taungenga (eds) (1981) Land, People and Government: Public Lands
Policy in the South Pacific, USP, p 136

[12] Secondary rights mean the rights of a person who is a secondary land
right holder. A secondary land right holder is a person who would not be
directly entitled to inherit rights form the land but still has rights to use
the land. Secondary rights include the right to cultivate, take water, pick
fruits and on some occasions, even live on the land.

[13] Usufractuary rights are lesser rights and they include the basic rights
of picking fruits or wild vegetables, coconuts, water and right of way.

[15]For example the claim of a secondary right holder to enter and pick
fruits on land.

[16] See Lamour P, Solomon Islands: Customary Land Registration Policy in
Acquaye and Crocombe (eds) (1984) Land Tenure and Rural Productivity in the
Pacific Islands, USP, p 68. The 13% registered land includes both government
land and customary land.

[17] Brown K, The Language of Land: Look Before you Leap, Journal of South
Pacific Law, Article 2 of Volume 4, 2000,
http://www.vanuatu.usp.ac.fj/journal_splaw/Articles/Brown2.htm

[18] These two incidents was cited by Kabutaulaka T (2000) Beyond Ethnicity:
The Political Economy of the Guadalcanal Crisis in Solomon Islands, State,
Society and Governance, ANU. Canberra. Australia.

[21] Lamour, P makes a similar classification of the colonial period into
three categories: the early, middle and the late colonial periods. His focus was
however on the economy as it affects land policy as opposed to land policy as it
affects the society, including the economy. See Lamour P, Solomon Islands:
Customary Land Registration Policy in Acquaye and Crocombe (eds) Land Tenure and
Rural Productivity in the Pacific Islands, USP, p 91.

[22] Ruthven D, Land Legislation from the Protectorate to Independence in Ben
W (1979) Land in Solomon Islands, IPS, p 239.

[24] See Ruthven, Land Legislation from the Protectorate to Independence in
Ben W (1979) Land in Solomon Islands, IPS, p 242

[25] See Ruthven, Land Legislation from the Protectorate to Independence in
Ben W (1979) Land in Solomon Islands, IPS, at p 245

[26] The Commission was named after the Commissioner, Judge Phillips. His
predecessor however, was Commissioner Captain Alexander who dealt with 20 claims
before he departed in 1920. See Ruthven D, Land Legislation from the
Protectorate to Independence in Ben W (ed) (1979) Land in the Solomons, USP, at
p 245

[27] Ruthven D, Land Legislation from the Protectorate to Independence in Ben
(ed) (1979) Land in the Solomons, USP, at p 245

[28] See Ruthven D, Land Legislation from the Protectorate to Independence in
Ben W (1979) Land in Solomon Islands, IPS, p 245

[29] See Lamour P, Solomon Islands, Customary Land Registration Policy in
Acquaye and Crocombe (eds) (1984) Land Tenure and Rural Productivity in the
Pacific Islands, USP, at 81.

[30] See Lamour P, Solomon Islands, Customary Land Registration Policy in
Acquaye and Crocombe (eds) (1984) Land Tenure and Rural Productivity in the
Pacific Islands, USP, at 81.

[31] See Lamour P, Solomon Islands, Customary Land Registration Policy in
Acquaye and Crocombe (eds) (1984) Land Tenure and Rural Productivity in the
Pacific Islands, USP, at 74

[32] See Ruthven D, Land Legislation from the Protectorate to Independence in
Ben (ed) (1979) Land in the Solomons, USP, at p 245

[37] Paterson D, Current Issues Relating to Customary Land – National
and Personal Heritage or Heriditas Damnosa? (Unpublished)

[38] Consensus is the traditional method of reaching decisions in most
Solomon Islands societies. It is suggested that if this traditional principle is
used in reaching decisions, a lot of unnecessary dissatisfactions will be
avoided.

[39] See Pickering S, A Proposal to Establish a Land Tribunal in Vanuatu,
Journal of South Pacific Law, Working Paper No. 4 of Volume 1, 1997, USP Law
School Web Site http://www.vanuatu.usp.ac.fj